Hello! Want To Retire in 1 Year Or Less

D

Daniel J

Recycles dryer sheets
Joined
Jun 28, 2012
Messages
88
Hi all,

Been lurking here the last week or so. Great site, a lot of useful information, my head is swimming a little bit.

I am single and turning 49 next month, I own a business that is on a slow downhill trend (we are still profitable but the glory days are gone due to changes in my industry). Lately I have been thinking enough is enough, I want to do something else (e.g., basically live my life rather than just work all the time).

I have been living below my means for years, I am an exceptional saver. Asset wise I seem to be in pretty good shape with investments (good size portfolio) and real estate (I have a house and a condo, both with good equity).

I could really use some help migrating out of Merrill Lynch personal and retirement accounts that have gone basically nowhere for years. I already have a money market account at Vanguard but no stock or bond accounts. I have concerns about buying these while the market is so high already. Thoughts? Good places to start reading? Any investments that might be good for a newbie DIY to look at, Dogs of the Dow or similar?

TIA.
 
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Talk with Vanguard about their financial planning service. If you move a significant amount of assets to Vanguard it would be complimentary. I've used the service a few times over the years and while it has its warts, it would likely be a good first step for you.
 
Daniel J said:
I have concerns about buying these while the market is so high
Click to expand...
The market isn't high. On second thought, maybe it is. Hang on, no it's not. Wait ...

Daniel J said:
Good places to start reading?
Click to expand...

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You'll also want to check out this forum's recommended reading list. Welcome and good luck.
 
Hello all,

Thanks for the helpful suggestions. I will start with this site and bogleheads and then look at books.

Today I cancelled an annuity contract that my Merrill FA pushed me into last week. I am getting out early so I'm told there should be no penalties other than excise tax on the gains, if any. This was a huge step in the right direction for me. It was the annuity shenanigans that got me thinking there must be another way than Merrill in the first place. Truth be told I'm not quite sure where I'm going yet but I'm excited to be on the path!

Thank you.
 
Walking away from Merrill is the correct path, just keep going and reading.
 
Hi Everyone,

Just wanted to check in here again as it has been almost 2 years since I first posted on the site.

Based on the posts above, I checked out the Bogleheads site, became an active member there and read a dozen or so personal finance books. I managed to escape Merrill Lynch and started managing my own investments at Vanguard following Boglehead principles. All of that has gone very well and I am very grateful for the advice given here, thank you.

Currently I am in the throes of the OMY Syndrome. I made some changes in my business which have turned it around some and it has been consistently profitable. That said, I am still tired of it. As one Boglehead recently posted, "You know it is time to retire when you have enough and you had enough." That is where I am really.

In a nutshell I know I have a good thing going on but it is very hard to walk away. For the past year or so, I have been working steadily, saving as much as possible and mulling about which direction to take. I keep going back and forth and am getting nowhere. I will outline the issues below in hopes of trying to sort out this difficult choice. I appreciate any feedback.

I currently own a house and a condo and run my service business out of a rented office, all in the San Francisco Bay Area. Aside from these complexities I generally follow a LBYM lifestyle.

Financials are:

  1. $3M in investment accounts, about 1/2 tax deferred.
  2. House market value as it is now $1.5M, loans $600k at 3.375% fixed and 2.49% floating. The house needs about $100k in work to get top dollar on resale (estimate $1.7M). The local housing market is insane, growth is anticipated 10% for the coming year. Currently vacant and it is much more house than I need. My inclination is to sell the house in this seller's market, diversify my risk and simplify my life.
  3. Condo market value $450k no loan. Nice place but the neighborhood is very urban and frankly, not great. Bought at the bottom of the market in 2011 as a possible retirement home and I like it most of the time. Currently living here as it is walking distance to work. All that said, if I decide to close the business I may not want to live here anymore. All fixed up and ready to sell or rent (estimated $2300 per month).
The many work endgame options I have been wresting with are:

  1. Keep on keeping on, make no changes at all. Currently netting $20k-$25k per month, almost all of it tax deferred.
  2. Sell the business (might be hard, although it cash flows nicely, most of the success is ME). This is likely the most logical option.
  3. Downsize the business to a smaller office, be more selective about clients, work part time if possible.
  4. Move the business back to the house, be more selective about clients, work part time if possible.
  5. Walk away from the business altogether. Life is short.
The housing/life choice options I have been wresting with are:
  1. Live in the condo, sell the house.
  2. Sell the condo, live in the house.
  3. Rent the condo, live in the house.
  4. Rent the condo and the house.
  5. Sell the condo and the house.

I have been a landlord in the past. While I am a handy guy and it is nice to get checks every month, I generally find dealing with tenants to be a headache. My inclination would be to sell one of the properties unless choosing to rent one out is simply deferring the housing/lifestyle decision pending outcome of the work decision.

As you can see there are a lot of pieces to this puzzle! Appreciate any feedback. Thank you.
 
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Daniel J said:
Hi Everyone,

Just wanted to check in here again as it has been almost 2 years since I first posted on the site.

Based on the posts above, I checked out the Bogleheads site, became an active member there and read a dozen or so personal finance books. I managed to escape Merrill Lynch and started managing my own investments at Vanguard following Boglehead principles. All of that has gone very well and I am very grateful for the advice given here, thank you.

Currently I am in the throes of the OMY Syndrome. I made some changes in my business which have turned it around some and it has been consistently profitable. That said, I am still tired of it. As one Boglehead recently posted, "You know it is time to retire when you have enough and you had enough." That is where I am really.

In a nutshell know I have a good thing going on but it is very hard to walk away. For the past year or so, I have been working steadily, saving as much as possible and mulling about which direction to take. I keep going back and forth and am getting nowhere. I will outline the issues below in hopes of trying to sort out this difficult choice. I appreciate any feedback.

I currently own a house and a condo and run my service business out of a rented office, all in the San Francisco Bay Area. Aside from these complexities I generally follow a LBYM lifestyle.

Financials are:

  1. $3M in investment accounts, about 1/2 tax deferred.
  2. House market value as it is now $1.5M, loans $600k at 3.375% fixed and 2.49% floating. The house needs about $100k in work to get top dollar on resale (estimate $1.7M). The local housing market is insane, growth is anticipated 10% for the coming year. Currently vacant and it is much more house than I need. My inclination is to sell the house in this seller's market, diversify my risk and simplify my life.
  3. Condo market value $450k no loan. Nice place but the neighborhood is very urban and frankly, not great. Bought at the bottom of the market in 2011 as a possible retirement home and I like it most of the time. Currently living here as it is walking distance to work. All that said, if I decide to close the business I may not want to live here anymore. All fixed up and ready to sell or rent (estimated $2300 per month).
The many work endgame options I have been wresting with are:

  1. Keep on keeping on, make no changes at all. Currently netting $20k-$25k per month, almost all of it tax deferred.
  2. Sell the business (might be hard, although it cash flows nicely, most of the success is ME). This is likely the most logical option.
  3. Downsize the business to smaller office, be more selective about clients, work part time if possible.
  4. Move business back to house, be more selective about clients, work part time if possible.
  5. Walk away from business altogether. Life is short.
The housing/life choice options I have been wresting with are:
  1. Live in the condo, sell the house.
  2. Sell the condo, live in the house.
  3. Rent the condo, live in the house.
  4. Rent the condo and the house.
  5. Sell the condo and the house.

As you can see there are a lot of pieces to this puzzle! Appreciate any feedback. Thank you.
Click to expand...

We decided to keep our businesses, scale back the hours to part-time and when the last kiddo is out, eventually sell the house and move to a condo with low expenses. We already work from home. If we are not too lazy and a bit lucky the part-time income might still cover our post kid expenses in retirement with minimal work.

I get buy out offers now and then but it is never for a life changing amount, and I don't want work more myself nor end up with potential seller's remorse like the people who sold Bill Gate a PC operating system for $50K. So I am just going to let things taper off.

Good luck with your decision.
 
I find being a landlord more unpleasant than going to the dentist. I'd only rent it out if you can't sell it & feel like you absolutely need the cash. Sounds like you're in good shape otherwise.

Life is short, eat dessert first and retire early.
 
For a frugal guy like me, reading someone has 3MM plus and making 20-25k per month is insane. Why didn't you retire MUCH sooner? Why even ask? Are you bragging?

Looks like a case of velvet handcuffs to me. Handcuffs are still handcuffs, time to get the scissors and snip.
 
Daniel J said:
Hi Everyone,

Just wanted to check in here again as it has been almost 2 years since I first posted on the site.

Based on the posts above, I checked out the Bogleheads site, became an active member there and read a dozen or so personal finance books. I managed to escape Merrill Lynch and started managing my own investments at Vanguard following Boglehead principles. All of that has gone very well and I am very grateful for the advice given here, thank you.

Currently I am in the throes of the OMY Syndrome. I made some changes in my business which have turned it around some and it has been consistently profitable. That said, I am still tired of it. As one Boglehead recently posted, "You know it is time to retire when you have enough and you had enough." That is where I am really.

In a nutshell I know I have a good thing going on but it is very hard to walk away. For the past year or so, I have been working steadily, saving as much as possible and mulling about which direction to take. I keep going back and forth and am getting nowhere. I will outline the issues below in hopes of trying to sort out this difficult choice. I appreciate any feedback.

I currently own a house and a condo and run my service business out of a rented office, all in the San Francisco Bay Area. Aside from these complexities I generally follow a LBYM lifestyle.

Financials are:

  1. $3M in investment accounts, about 1/2 tax deferred.
  2. House market value as it is now $1.5M, loans $600k at 3.375% fixed and 2.49% floating. The house needs about $100k in work to get top dollar on resale (estimate $1.7M). The local housing market is insane, growth is anticipated 10% for the coming year. Currently vacant and it is much more house than I need. My inclination is to sell the house in this seller's market, diversify my risk and simplify my life.
  3. Condo market value $450k no loan. Nice place but the neighborhood is very urban and frankly, not great. Bought at the bottom of the market in 2011 as a possible retirement home and I like it most of the time. Currently living here as it is walking distance to work. All that said, if I decide to close the business I may not want to live here anymore. All fixed up and ready to sell or rent (estimated $2300 per month).
The many work endgame options I have been wresting with are:

  1. Keep on keeping on, make no changes at all. Currently netting $20k-$25k per month, almost all of it tax deferred./
    This puzzles me. How can you own a business netting $20-$25K per month and have it tax deferred? I'm really curious about this.

    Thanks. I'm just a doctor. We're notoriously bad with money.


    Sent from my iPhone using Early Retirement Forum
    Click to expand...
Click to expand...
 
Daniel J said:
....The many work endgame options I have been wresting with are:

  1. Keep on keeping on, make no changes at all. Currently netting $20k-$25k per month, almost all of it tax deferred.
  2. Sell the business (might be hard, although it cash flows nicely, most of the success is ME). This is likely the most logical option.
  3. Downsize the business to a smaller office, be more selective about clients, work part time if possible.
  4. Move the business back to the house, be more selective about clients, work part time if possible.
  5. Walk away from the business altogether. Life is short.
The housing/life choice options I have been wresting with are:
  1. Live in the condo, sell the house.
  2. Sell the condo, live in the house.
  3. Rent the condo, live in the house.
  4. Rent the condo and the house.
  5. Sell the condo and the house.
....
Click to expand...

2 and 1

I assume that there are no key employees who are interested in the business. Given your importance to the business might you be able to sell it and take a role as a part-time employee for some transition period.

I would lean towards selling the house and living in the condo until you are no longer involved in the business.
 
I think before you decide what to do in the next year, you have to begin with the end in mind. What do you see yourself doing in 5, 10 and 20 years? What would your ideal day be? Where would you be living? Then work backward from there. No sense in selling your business if you don't have anything you'd rather be doing.
 
I don't see a reference to what your annual expenses are.

I also wouldn't mess w/ being a landlord. Your guesstimate on rent of $2,300/mo sounds like it's gross, and less than 7% yield. Take out condo fees, insurance, and real estate taxes, and your Net Cash Flow isn't really all that impressive. And that's before any budgeting allowance for repairs, appliance replacement, vacancy, tenant damage, etc.

With 3MM in investments, and being a little conservative on selling your 2 residences, you'd be able to add another $1.2MM to the stash (after paying off the mortgage, realtor's fees, etc.).

What kind of a place would you want to live in? Assuming $800k is enough, that would leave your portfolio at $3.4MM, which should be able to spin off at least $100,000/year pre-tax.
 
Thanks for the replies everyone. It really helps me to think through the issues better. Heck, even the process of creating my earlier post has helpful as it was not until then that it occurred to me that I really have *two* decisions to make, not one (before then it was just one jumbled mess).

Responding to the points raised in the above posts:

I like the idea of continuing to work on a limited basis, at least for a little while. One of the stumbling blocks I have run into is just being able to let go of the business emotionally. It is my baby, I built it from nothing and nurtured it for 17 years through many ups and downs.

I don't really want to be a landlord either, especially in this town. After expenses and taxes, my monthly net income on the condo would be $1500 tops assuming no vacancy or capital expenditures. Not horrible, but not great either.

Yes, I could probably have retired sooner. I am frugal too and the truth is that things have changed a lot for me in the last 2 years. I turned my business around from near failure, and my net worth increased dramatically due to aggressive personal and business cost cutting, an increased savings rate, giving Merrill the boot, and significant appreciation in the stock and local housing markets. I've worked very hard to get where I am, I also know I have been lucky as well and I am grateful.

I am using a 401k plan and a Defined Benefit Plan to defer as much income as possible. As a 50-year old business owner with only a few employees I am a perfect fit for a Defined Benefit Plan. The costs to administer such a plan are fairly high and I've had to cover all of my employees in the plan as well. All in all I think it was a good choice given my situation. I'll know for sure at RMD time!

No key employees are interested in purchasing the business unfortunately. I had one candidate 2 years ago but he quit when the business hit a rough patch.

Assuming I cash out of both properties I would either rent for the duration or until the next correction to buy something modest. Not sure where, the Bay Area is nice -- perhaps I will get to see more of it if I retire or at least work less. ;--)

I live relatively modestly for the area, annual expenses estimated about $60k per year give or take.

What I am going to do with my time once retired is the most difficult question!!! I am definitely one of those who retire "from" something. Almost my entire adult life has been work, work, and more work. I am very driven and like to stay busy so 70-80 hour weeks with no vacations for years and years were the norm. It has only been in the last year or so that I have slowed down to a more "normal" schedule and started taking vacation time as well. So I have some significant self-discovery to do! Off the top of my head I would like to do the following:

fix up the house for sale
get in shape (i currently do not exercise enough)
take care of myself better
develop emotionally and spiritually
eat better, cook at home more
read more
study and play music more (I play bass)
watch the waves roll in
cultivate new friendships
travel some
develop some new hobbies

Thanks for everyone's help, I appreciate it.
 
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Daniel J said:
I like the idea of continuing to work on a limited basis, at least for a little while. One of the stumbling blocks I have run into is just being to let go of the business emotionally. It is my baby, I built it from nothing and nurtured it for 17 years through many ups and downs.
Click to expand...

You have enough money if your business is your baby you don't need to sell it even if that maximizes your net worth. You have enough other assets so that going forward you can maximize your happiness and sense of purpose in life instead. Maybe that means continuing to work part-time until you find something else to fill your days. DH would be quite happy to never work again, travel, play bocce ball and hang with his retired homies. I am okay doing the traditional retired stuff part-time or even most of the time but I don't think I could just do that all the time.

I am not the landlord type so if it were me I would not rent out a property even if it maxed out our net worth as it just isn't something I would enjoy doing.

You have enough that you can focus on maximizing your happiness, tranquility and sense or purpose or whatever else is important to you, and not just focus on maximizing the dollars.
 
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daylatedollarshort said:
You have enough money if your business is your baby you don't need to sell it even if that maximizes your net worth. You have enough other assets so that going forward you can maximize your happiness and sense of purpose in life instead. Maybe that means continuing to work part-time until you find something else to fill your days.

….

You have enough that you can focus on maximizing your happiness, tranquility and sense or purpose or whatever else is important to you, and not just focus on maximizing the dollars.
Click to expand...

Thanks a lot for the words of wisdom and encouragement, that is very helpful. Maximize happiness, what a concept!
 
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